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Prohibition: Bootleggers, Baptists, and Bandits

Strange bedfellows.

MAY 29, 2012 by SANDY IKEDA

The political economist Bruce Yandle’s phrase “bootleggers and Baptists” captures the idea that special-interest groups with conflicting moral positions often find common cause in particular government interventions.  Many on the political left agree with crony capitalists that government should make taxpayers bailout some businesses that are “too big to fail”; some radical feminists agree with some Christian fundamentalists that government should ban pornography.  Their reasons are different but the policies they support are the same.

Bootleggers and Baptists

The inspiration for “bootleggers and Baptists” (pdf) comes directly from the diverse support that so-called “blue laws” have historically received.  According to Yandle,

Bootleggers . . . support Sunday closing laws that shut down all the local bars and liquor stores [because they increase the demand for illegal hooch].  Baptists support the same laws and lobby vigorously for them [because they believe drinking on Sunday is wrong].

Of course the story behind Prohibition era in the United States, marked by the passage of the Eighteenth Amendment to the U.S. Constitution (1920-33), is this lesson writ large.  Banning the sale of liquor, whatever it did to deter drinking, did wonders for promoting organized crime, which had (and still has) a comparative advantage over law-abiding people in supplying and demanding illegal goods. By clamping down on a product in such high demand, local and national governments (including the fledgling Federal Bureau of Investigation, which also prospered during Prohibition) spurred mob activity, intentionally or not, from Los Angeles to Chicago to New York.

Ken Burns: No Eighteenth Amendment without the Sixteenth

What I hadn’t realized until I saw Ken Burns’s excellent documentary “Prohibition” is that an important and, I think, less-known connection existed between the anti-liquor lobby–which included among others the Anti-Saloon League (ASL) and the Women’s Christian Temperance Union (WCTU)–and passage of the Sixteenth Amendment to the US Constitution.  That amendment gave Congress in 1913 the power

to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

(The Supreme Court had ruled an earlier income tax law unconstitutional in 1895.)

In an earlier FreemanOnline column, Don Boudreaux explained why Prohibition was repealed after only a dozen or so years.  In short the inability to tax liquor, now illegal, along with the onset of the Great Depression, had a devastating impact on government tax revenues.  My focus is on the alliance between anti-liquor forces on the right, pressing for prohibition, and Progressives on the left, pressing for an income tax.

Now, according to one source:

By 1868, the main source of Government revenue derived from liquor and tobacco taxes. . . . From 1868 to 1913, almost 90 percent of all revenue was collected from . . . excises.

That’s a significant source of taxes, without which the government could hardly operate, let alone grow to the size needed to implement the Progressives’ agenda: making government more efficient in order to run society along “rational” principles.  Government programs to improve schools, health care, and industry need a steady funding source, and without liquor taxes intervention could not go far enough.  So no matter how hard prohibitionists argued, marched, and lobbied, and no matter how sympathetic government officials may have been to their cause, they would never dream of sacrificing their cash cow on the alter of idealism–at least not without an equally reliable alternative.

And that of course led naturally to the social conservatives support of the progressive (in both senses of the word) income tax.  The Sixteenth Amendment passed in 1913, opening the way in 1919 for the Eighteenth Amendment.  The rest is history.

Baptists and Bandits

I’m not arguing that the alliance was primarily responsible for passage of the amendment, but rather that it’s clear the interests of social conservatives and the taxman were perfectly aligned.  “Baptists” on the one side, and on the other, those eager to expand the use of aggression to plunder wealth created by trade and to spend it to indulge their own preferences–that is, bandits.

ABOUT

SANDY IKEDA

Sandy Ikeda is a professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism.

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